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COS.UN, Taxes, Hedging, and the price of crude

Yahoo! CWEI:
by: agrossfarm 06/18/05 11:40 am
Msg: 98302 of 98302

At the risk of stirring up the hornets again, I'll give you a few thoughts of mine that might get you to thinking, although we know that these decision are always proven good or bad in hindsight.

I certainly consider the downside of reinvesting post-tax remaining capital when I contemplate selling and compare it to the risk of a price decline in any significant position I am thinking of selling. This is especially important for Canadian Royalty Trust (CRT) investors that get part of their distributions as Return Of (not ON) Capital (ROC), which while currently not taxable, adds to capital gains upon sale.

Over the past few years, when I have sold a trust, I usually replaced it with another trust or option position on an E&P, so I was just adjusting within the sector (since I am a top-down type of guy, being in Trusts because of the continuing climate for Petroleum and Energy in general). My point here is that, if you are to sell one petrol. investment and replace it with another (either/or to sleep better or to make a better return), you should realize that you are just changing horses in the race, not being scratched.

You could sell a partial position as it goes up in price, if that seems a smart idea. You could also run some correlations to find something (like XLE) that you could use to hedge a position, or hedge using options on another OilSands player (assuming they are higher correlated with COS.UN).

My longer-term view of COS.UN fits into a discussion I have with Johnny Gambi on this board a day or two ago, about LNG's effect on NG pricing. NG pricing and availability is important to t"

posted by agrossfarm @ 8:43 AM